Personal: dividend allowance decrease

Personal allowance

From 6 April 2017 the tax-free personal allowance will increase to £11,500. The higher rate threshold will rise to £45,000 except in Scotland where it remains at £43,000.

National insurance contributions

Update: On 15 March Philip Hammond announced that planned changes to class 4 NICs will not go ahead.

With class 2 national insurance contributions (NICs) due to be abolished in April 2018, class 4 NICs are to rise from 9% to 10% in April 2018 and then from 10% to 11% in April 2019.

The intention of this change is to move toward equalising the payments made by the self-employed when compared with those who are employed.

However, it is expected that only a self-employed person with profits over £16,250 will have to pay more as a result of these changes.

The government will look further to see if it considers there is a greater case for consistency in parental benefits between the employed and self -employed.

Dividend allowance

The £5,000 tax-free dividend allowance, introduced in April 2016, is to be reduced to £2,000 from 6 April 2018.

Capital gains tax

The annual capital gains tax exemption increases by £200 to £11,300.

Inheritance tax

There were no new announcements regarding inheritance tax. The new residence nil-rate band limit is available from 6 April 2017 at a rate of £100,000.

Money purchase annual allowance

The money purchase annual allowance (MPAA) will reduce from £10,000 to £4,000 from 6 April 2017.

There will be no changes to how the MPAA will operate or how it is calculated and the transitional provision for the 2015/16 tax year remains unchanged.

Any unused MPAA cannot be carried forward for later years.

Qualifying overseas pension schemes

Transfers to qualifying recognised overseas pension schemes (QROPS) requested on or after 9 March 2017 are to be taxable. This won't apply if the point of transfer both the individual and the pension savings are in the same country and both are within the European Economic Area, or the QROPS is provided by the individual’s employer.

If this is not the case, a 25% tax charge on the transfer will apply before the transfer is made.

Lifetime ISA

The Lifetime ISA will be available to individuals aged between 18 and 40 from 6 April 2017. The Lifetime ISA allows for savings of up to £4,000 per annum up to the age of 50. There is an entitlement of a 25% bonus of up to £1,000 from the government each year.

Withdrawals can be made without penalty if the funds are used to purchase a first home or for any reason after the age of 60. Withdrawals before age 60 for another reason will incur a charge that will effectively repay the government’s bonus, plus an additional charge.

NS&I Investment Bond

An NS&I Investment Bond will become available for 12 months from April 2017.

This bond will be available for all those aged 16 or over and is subject to a minimum investment of £100 and a maximum of £3,000. The bond will attract a 2.2% interest rate over a term of 3 years.